The War Corps

Are we drunk on power, digging ourselves deeper, ignoring calls for peace and prosperity?

(Source: Getty Images)

Bill Bonner, reckoning today from Normandy, France... 

'My generation… we’ve given nothing. We’ve given nothing! And now we want to screw our grandchildren…We’ve got to stop guys, we’re DRUNK....We're digging this deep hole...What are we doing here?’

~ Stanley Druckenmiller

It is All Souls day. What do the shades have to say about us?

Driving through Normandy this morning we passed through the town of Vimoutiers. There is nothing special about the town. Like so many others in Normandy, it was largely destroyed by Allied firepower in WWII. Today, it is drab.  Uninteresting.  Nothing to see.

But in the town is a plaque recalling an instance of private generosity. Margaret Mitchell, author of ‘Gone with the Wind,’ had heard about what had happened during the war. She sent a check to rebuild the town’s hospital. In return, she was made an honorary citizen. She wrote a thank-you:

“Nothing that has happened to me before has ever pleased and touched me as much as this honor which you and the Municipal Court of Vimoutiers have paid me.”

She intended to visit the town, but was killed in a car crash in 1949. She was dead…but she left things behind that would be remembered and appreciated for generations.

Another Era

Back then, Americans were known for acts of kindness and generosity. The US economy boomed. Its lunch-bucket workers and wealthy investors grew richer together. Its dollar was the strongest currency in the world – backed by gold. Its trade with the rest of the world was in balance. So was its federal budget.

One generation comes on the scene. Another departs. What does it leave behind?  In order to have something to leave, you must save. In order to save, you have to make more than you spend. That is, you have to take some of your output and set it aside. It is the part of your harvest you did not eat. It is the money you made, but did not spend. It is the trees you planted, but did not cut down…the houses you faithfully maintained…the public buildings you did not blow up.

But instead of encouraging saving, for the last 30 years, at least, the Fed has lured people to borrow and spend. It rewarded borrowers with the lowest interest rates in 5,000 years. It punished savers, leaving them with a return on their money that was, after inflation, negative.

Our generation, those of us born after WWII, was lucky. Jobs were plentiful.  Housing and transportation were (relatively) cheap. And, since 1980, our assets – houses and stocks – rose. But we were lucky in other ways too.

Our grandparents had brought forth the power of fossil fuels…greatly improving US output and giving us the richest country on earth. Our parents had just trounced Germany and Japan. Then, Eisenhower cut ‘defense’ spending, balanced the budget, protected the dollar, and warned us not to let the ‘military industrial complex’ get too big for its britches.

The War Corps

All over the world, people looked to America for leadership…as a country that would do the right thing…whose technology, books and movies set new standards…and whose institutions could be imitated. And for good reasons. The Marshall Plan was an American initiative to rebuild Europe, at a cost of $173 billion (in today’s money). American donors rebuilt Versailles and other priceless monuments. Private US citizens contributed to rebuilding churches…and restoring whole towns. Privately-supported charities, missionaries and relief organizations rushed to the Balkans, the Middle East, Africa and the Far East offering whatever help they could. In 1961, John F. Kennedy created a “Peace Corps” which was intended to promote progress and harmony throughout the undeveloped world. In 1966, Jimmy Carter’s mother – at age 68 – signed up for service in India.

But how things change!

The Peace Corps today is a legacy project of an earlier age, with a tiny budget, less than 1/10^th of 1% of Pentagon spending. 

America still has no real enemies in the world – except for those it has created itself – Iraq, Afghanistan, Russia, Palestine, China, Iran.

General Eisenhower brought military spending down. But it didn’t stay down. For the last 40 years, defense spending has gone up year after year. The old general was right…military/industrial complex lobbyists put our representatives in their pockets, like nickels and dimes. Now, the US spends more than the next 10 largest counties – combined. Little of this has much to do with defense – which could be accomplished with a lean, mean Eisenhower-style military at approximately one-third the present cost.    

When we were young, we had a nation that was the envy of almost the whole world…with a huge net investment position with the rest of the planet. Today, we are the world’s biggest debtor, with an annual trade deficit of nearly $1 trillion.

And now, even the Industrial Revolution seems to have run its course. We can introduce new machines, but we get only incremental gains. The use of traditional fuels is actually going down in the US.

Mea Culpa

As for the balanced budget, don’t make us laugh. The measure of our forward progress is the difference between what we produce and what we consume…and how it is used. It determines what we leave to our children.  

But today’s US budget deficit – at 7% of GDP – leaves little for the next generation. Little is left to build new factories and create new jobs. As for rebuilding the factories of the Eastern Ukraine or hospitals of Gaza – who’s going to do that? Instead, we borrow more money to provide weapons to the Ukraine and Israel…so they can blow them up.

Back in the US, our existing capital base – our manufacturers, infrastructure, schools and hospitals – wear out. How can they be replaced?

And we, the Baby Boomer generation…we have presided over a degradation of the USA in almost every category. Financial, economic, political, technological, moral…

…what do we have to say for ourselves?  

And what do we do when it becomes impossible to keep living in the style to which we’ve become accustomed? Do we own up…and straighten up?  

Or print more money?     

Regards,

Bill Bonner